J U D G M E N T The following Judgment of the Court was delivered:
W I T H
CIVIL APPEAL NOS. 6579-80 of 1995
AND
Civil Appeal No.6582 of 1995 KIRPAL, J.
In these appeals by special leave what arises for consideration is whether the respondent is liable to pay sales tax and to be registered as a dealer under the relevant provisions of the Orissa Sales Tax Act, 1947 (hereinafter referred to as the ’said Act’).
The respondent’s main business is of running of buses and providing transport facilities to the travelling public. Along with these services the respondent has been disposing of unserviceable, old, obsolete and unutilised parts from its stores. These parts used to be disposed of at yearly intervals. The respondent did not get itself registered as a dealer under the said Act. According to it, no business was being carried on in respect of which any sales tax could have been levied.
The Sales Tax Officer considered that the respondent was liable to pay tax. He accordingly made an order of assessment under Section 12 [5] of the said Act seeking to tax respondent’s turn-over on the sale of unserviceable old parts, obsolete parts, spare parts, sale of fuel, oil and supply of material utilised in body building to the State Transport service. The Assessing Authority also levied penalty inasmuch as the respondent had failed to get itself registered under the Act.
The respondent filed an appeal against the aforesaid decision before the Assistant Commissioner, Sales Tax, but was not successful. Second appeal was then preferred to the Additional Sales Tax Tribunal, Cuttack. The Tribunal accepted the contention of the respondent and came to the conclusion that the respondent could not be regarded as a dealer within the scope of the said Act for the purpose of levying tax.
On an application being filed the Tribunal referred the following three questions of law to the High Court:
"[a] Whether on the facts and in
the circumstances of the case, the
Member, Addl. Sales Tax Tribunal,
was legally correct in holding that
in respect of the transactions in
spare parts and sale of fuel, oil
etc. at cost the assessee is not a
dealer as per Section 2 [c] of the
Orissa Sales Tax Act, 1947?
[b] Whether on the facts and in
the circumstances of the case, the
Member, Addl. Sales Tax Tribunal is
correct to hold that purchases of
new spare parts and accessories of
such vehicles as Ford, Chevrolet,
Despot, Dodge, etc. were not made
with an intention to carry on
business of selling the same?
[c] Whether on the facts and in
the circumstances of the case,
Member, Addl. Sales Tax Tribunal,
is legally correct to hold that the
assessee is not a dealer as per
Section 2 [c] of the Orissa Sales
Tax Act, 1947 in respect of the
sale turnover of unutilised new
spare parts?"
The High Court vide its judgment answered all the aforesaid questions in favour of the respondent and held that it had not carried on any business as a dealer and, therefore, was not liable to payment of sales tax.
On behalf of the appellant it is contended that though the main business of the respondent was of carrying passengers by the sale of spare parts and other items must be regarded as being incidental to that business and, therefore, the turn-over in respect of the said sales was liable to tax.
Mr. P.N. Misra, learned counsel for the respondent, however, submitted that respondent was not in the business of selling goods and, therefore, such sales could not form part of its taxable turn-over and the respondent was not obliged to register itself as a dealer under the said Act. Our attention was drawn to a few decisions in an effort to show that the respondent could not be regarded as carrying on business of selling the spare parts etc. The first case which was relied upon was that of State of Gujarat Vs. Raipur Manufacturing Co. Ltd. [(1967) 19 STC 1 ]. In that the company was carrying in the business of manufacturing cotton textiles, sale of old discarded goods, coal, byproducts and subsidiary products. In determining with regard to such sales the company could be considered as carrying on business, this Court held that whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transaction of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive. In other words irregular sales of small quantities of old discarded goods could not be regarded as carrying on of a business activity. Volume, frequency, continuity etc. of purchase and sales in those items was the determining factor. This principle has been followed by the Andhra Pradesh High Court in Andhra Pradesh State Road Transport Corporation, Hyderabad Vs. The Commercial Tax Officer [(1971) 27 STC 42 ] and the State of Andhra Pradesh Vs. Andhra Pradesh Road Transport Corporation [(1989) 74 STC 336].
The relevant provisions of the Orissa Act are first required to be examined in order to see whether the aforesaid decisions can support the respondent’s contentions. Section 4 of the said Act is a charging section. It, inter alia, provides that every dealer whose gross turn-over during the year exceeds the specified limit shall be liable to pay tax under the said Act on the sales and purchases effected by it. The expression ’dealer’ has been defined in Section 2 [c] of the Act. The relevant portion of the said definition is as follows:
"[c] ’Dealer’ means any person who
carries on the business of
purchasing, selling, supplying or
distributing goods (including goods
used or involved in the execution
of works contract, whether as goods
or in some other form), directly or
otherwise, whether for cash or for
deferred payment or for commission,
remuneration or other valuable
consideration and includes,-
[iv] a casual dealer;"
The expression ’casual dealer’ has been defined in Section 2[bb] and is as follows:
"[bb] ’Casual dealer’ means a
person, who has, whether as
principal, agent or in any of the
capacity occasional transactions of
a business nature involving
purchasing, selling, supplying or
distributing goods in the State
whether for commission,
remuneration or otherwise."
The expression ’business’ has been defined in Section 2[b] and is as follows:
"[b] "business" includes -
[I] any trade, commerce or
manufacture or any adventure or
concern in the nature of trade,
commerce or manufacture, whether or
not such trade, commerce,
manufacture, adventure or concern
is carried on with a motive to make
gain or profit and whether or not
any gain or profit accrues form
such trade, commerce, manufacture,
adventure or concern; and
[ii] any transaction in connection
with or incidental or ancillary to
such trade commerce, manufacture,
adventure or concern."
The decision of this Court in Raipur Manufacturing Co. Ltd. case cannot be made applicable here. In that case this Court considered the volume, frequency, continuity and regularity of transactions of purchase and sales being an important element in determining whether a business was being carried out apart from the element of profit making being there. Hence in the Orissa Act the expression ’dealer’ includes a casual dealer. A casual dealer defined in Section 2[bb] is one who has occasional transactions of a business nature involving purchasing, selling, supplying or distribution or goods, whether for commission, remuneration or otherwise. This means that even if a person did not have a systematic or an organised business involving regular transactions of purchases and sales he could still be regarded as a casual dealer if he entered into occasional transactions of a business nature involving purchases, sales etc. of the goods. In the cases cited by Mr. Misra there was no consideration of this aspect at all.
It cannot be denied that the respondent is a business organisation whose activity is that of providing road transport. In the course of its carrying on of the said business some obsolete parts, spare parts etc. are not required by it. As a prudent business organisation the said items, which were obviously used or intended for use in its business, are sold when there is no requirement for them. We find it difficult to accept that such sales cannot even be regarded as occasional sales of a business nature which would make the respondent a casual dealer within the meaning of that expression occurring in Section 2[bb] of the said Act. In the case of State of Tamil Nadu Vs. Burmah Shell Oil Storage and Distributing Co. of India Ltd. and Anr. [ (1973) 31 STC 426 ] this Court was concerned, inter alia, with the sale of scrap where the definition of the word business in the Madras General Sales Tax Act had done away with motive for making profit as being a relevant consideration in determining whether the assessee carried on business or not. Section 2(d) of the Madras Act was similar to the present definition in Section 2(b) of the Orissa Act and it included the words "whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern". In connection with the sale of scrap it was observed at page 433 as follows:
"In the view we hold the scrap
sold is certainly connected with
the business of the company and the
turnover in respect of this
commodity is liable to tax. It
cannot also be said of the
assessee’s advertisement materials
at cost price or less than cost
price is not connected with the
business of the assessee.
Calendars, wallets and key chains
are all given by the dealers to its
customers for purposes of
maintaining and increasing the
sales of the products of the
assessee and is therefore,
connected with the business. What
the assessee is doing is to
facilitate the dealers to acquire
at their cost such advertising by
the assessee-company which, instead
of allowing each of them to have
these separately printed or
manufactured, itself undertook to
do go and supplied them to its
dealers. The supply of such
material is in our view being
connected with the business is
liable to be included in the
turnover of the assessee."
In the District Controller of Stores, Northern Railway, Jodhpur Vs. The Assistant commercial Taxation Officer and Anr. [ (1976) 37 STC 423, ] this Court was concerned with a question whether the sales of unserviceable material and scrap by the Northern Railway, Jodhpur, was exigible to sales tax. the Rajasthan Sales Tax Act had been amended and, like the Madras Sales Tax Act and the Orissa Sales Tax Act the definition of business had eliminated the profit making element and keeping this in view this Court held that the activity of the appellant in selling unserviceable material and scrap would be business within clause 1 of the definition of the word ’business’ introduced by the amending Act. This Court held even if it be assumed that the activity involved in selling unserviceable material and scrap-iron etc. may not amount to carrying on business in the normal connotation of that term, it would still be business within the meaning of the expression business occurring in the said Act. Such sales were, therefore, to be held to exigible to sales tax.
The definition of the word ’business’ in the Orissa Act being perimateria with the definition of such expression in the Madras Act as well as the Rajasthan Act, the ratio of the decision in Burmah Shell case (supra) and the District Controller’s case (supra) would be clearly applicable in the instant case and, therefore, the respondent will have to be regarded as a dealer carrying on the business of selling spare parts etc. and thereby become liable to pay sales tax on the sale of such items.
It was submitted by Mr. Misra that neither the High Court nor the other authorities had gone into the question as to whether the respondent could be regarded as a casual dealer. It is true that apparently the attention of the High Court was not drawn to Section 2[bb]. This, however, can be of no assistance to the respondent because on the facts as found by the Tribunal it is evident that the provisions of Section 2[bb] are clearly attracted to the instant case. If the High Court has ignored a relevant statutory provision and then come to a wrong conclusion that cannot be a ground for the respondent to contend that Court should also not refer to the said sub-section. The contention of the respondent would have been correct if the applicability of Section 2 [bb] depended on the investigation of facts and that had not been done. However, the facts as found here clearly disclose that the respondent has to be regarded at least as a casual dealer. The mere fact that the High Court over-looked the said provision cannot be a ground for the respondent to contend that this Court should not go into that question.
In our opinion the High Court was not right in concluding that the respondent was not a dealer who was liable to pay sales tax on the sales of the spare parts etc. made by it. We accordingly allow these appeals and answer the questions of law in the negative and against the respondent. There will be no order as to costs.